A 'baby farm' has reportedly been discovered in an Indian hospital where newborns are being bought, sold and swapped.

Police said that babies born out of rape or illicit relationships were being delivered to the private hospital in the Gwalior district and in some cases were being sold for 1 lakh - just over £1,000 - according to Times of India .

Hospital manager Arun Bhadoria reportedly said that young, pregnant women approaching the hospital for terminations were being convinced to deliver their babies.

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A police investigation found that babies were being delivered to the hospital and sold on (Image: Getty)

The newspaper also reports that in one case, a newborn girl was swapped with a boy.

The hospital was raided on Saturday night after reports of children being sold, and five people have been 'booked' under acts of buying, dealing in slaves or buying a minor for the purpose of prostitution.

Those being investigated include the hospitals director, manager and parents who bought babies.

Local police are now said to be dispatching teams to search for couples who purchased children from the hospital, while investigations continue to rescue other newborns 'sold' in the same way.